Doing nothing may be the path of least resistance. But it can cost you.
Taking a few simple steps can be the difference between forging ahead financially and merely coasting along. And action – rather than inertia – can pay off both for saving, and making, money.
Take a closer look at key service providers
On the savings front, sticking with the same service provider you’ve always used could mean paying more than necessary. Comparison site Finder, for instance, says one in five Australians have been with the same telco for the last decade. Yet these days we have over 30 providers to choose from and plans are becoming cheaper all the time. So it’s worth looking around to see if you could get a better deal.
It’s a similar story with electricity bills. Most of us know it may be possible to save by switching to a cheaper provider. But it can all seem too hard.
However, a report by the Australian Energy Regulator found it’s possible to save as much as $1,400 by making the move to a cheaper supplier. With that sort of cash up for grabs, it can pay to visit the Energy Made Easy website to compare offers.
Put regular savings on autopilot
Taking positive action also counts towards achieving financial security. And this is an area where I can offer plenty of valuable tips based on years of experience.
An easy step we can all take is to set up a regular transfer from an everyday account to a savings account. A colleague of mine did this a bit over a year ago, putting savings of $50 per week on autopilot. In a busy life she pretty much forgot about it, thinking a $50 weekly deposit wouldn’t add up to much. Last week she checked the balance and found her savings had grown to over $3,000. In another two years she could have more than $8,000 – and that’s allowing for today’s low interest rates.
So, imagine the possible benefits of regularly adding to investments backed by growth assets. In fact, a 20-something who adds an additional $50 per month to their superannuation savings could supersize their final retirement nest egg by $50,000.
Know when to hold steady
Taking an active approach to your finances is important though there can be times when it pays to sit tight.
As a guide, in February we saw the Australian sharemarket take a dip, something that concerned many investors. But let’s put it in perspective. The 3.3% drop in local shares in the first fortnight of February would have resulted in a $2,000 loss on super savings of $100,000. That’s hardly cause for panic, and history tells us that quality shares will go on to recoup their value.
That said, sitting by and allowing short term storms to subside is quite different from turning a blind eye to your finances altogether. Make a point of taking a few extra steps to make your money go further – you’ll come out the winner in the long run.
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Paul Clitheroe is a founding director of financial planning firm ipac (now known as AMP Advice), Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.